unit 9 Flashcards
What happens at the title closing?
The buyer completes financing arrangements (referred to as closing the loan).
The seller transfers the title.
Both the buyer and seller pay the necessary taxes, fees, and other charges.
What is the most important document at closing and why?
The deed is the most important document because it transfers the property to the purchaser.
Define the term marketable title.
A marketable title is one that is so free of defects that the buyer is certain they will not have to defend the title.
What is an abstract of title?
A written, chronological summary of the property’s title records and other public records affecting rights and interests in the property. It includes the property’s chain of title and all current recorded liens and encumbrances, by date of filing.
What does a title search reveal?
The legal description of the property.
The owners of record.
Any outstanding liens or encumbrances on the property.
Who needs title insurance and why?
Both the buyer and the lender need title insurance. Insurance for the buyer ensures a clear title and protects the investment. Insurance for the lender protects the lender’s interest in the property.
What is escrow?
The process in which a disinterested third party holds all money and documents relating to a transaction until all of the terms and conditions of the escrow instructions have been satisfied.
List three activities that take place during the escrow period.
Getting an appraisal.
Ordering pest control and other inspection reports.
Obtaining property insurance.
Gary carries an insurance policy that equals 60% of the replacement value of his home. He suffers $8,000 in damage on his home after a windstorm. How will his insurance claim be handled?
It will probably be prorated as follows to give him $6,000:
60% ÷ 80% = 75% x $8,000 = $6,000
What factors determine whether a company will issue an insurance policy on a property and what premium the company will charge?
Current condition of the property
Claim history on that property
Owner’s claim history
Owner’s credit history
What does RESPA require lenders to give to borrowers?
The correct figures pertaining to their closing costs.
RESPA does not apply to what kinds of loans?
Seller-financed loans or loan assumptions (unless the lender has changed the terms of the assumed loan or charges more than $50 for the assumption).
List three items that a buyer usually pays at closing.
Credit fees
Loan origination
Homeowner’s insurance
If an item is paid for in advance by the seller, how will it be handled on the settlement statement?
The buyer will receive a debit and the seller will receive a credit.
What do you call those items that the seller has incurred but have not been paid and how will they be handled on the settlement statement?
These items are paid in arrears. The buyer will get a credit and the seller will get a debit.
Sally and Sam have sold their home to Tina and Max. The closing is set for August 23. The insurance policy of $1,700 was prepaid. Using the 12-month/30-day method, what will be Tina and Max’s share of the insurance expense and how will it be handled on the settlement statement?
$1,700 ÷ 12 = $141.67
$141.67 ÷ 30 = $4.72
Seller: $141.67 x 7 = $991.69 (accounts for January through July)
$4.72 x 23 = $108.56
$991.69 + $108.56 = $1,100.25
Buyer: $1,700 - $1,100.25 = $599.75.
Where in the Closing Disclosure will you find the items that are to be prorated between the buyer and seller, at closing?
Page 3, Items K, L, M and N.
Where on the Closing Disclosure would you find information about the real estate broker’s commission?
On page 2, section H, Other
What is important about the last line on page 3 of the disclosure?
This line shows the amount of money the buyer needs to bring to closing as well as the amount of money the seller will receive at closing.
Who is responsible for reporting the real estate sale to the IRS?
The responsibility for filling out and submitting the form generally falls to the person who conducted the closing.
Both the buyer and the lender should have ______.
title insurance
A seller is required to deliver a marketable title at closing. Once the lender has qualified the property that will be used as collateral for the loan, the lender is preparing to issue to the borrower, and the loan officer will request and review a ________ on that property.
title search
Once the purchase offer has been accepted, the _____ process begins in which the buyers secure their financing, get whatever inspections they want and get a preliminary title report, and the sellers pay off any liens against the property, make or arrange for repairs. and execute the deed.
closing
A ____ title insurance policy may be issued to a lender only, a buyer only, or jointly to lender and buyer.
standard
An _______ policy insures against many of the items excluded in the standard policy. Lenders require their mortgagee polices to be extended coverage policies.
extended coverage
____ is defined as the process in which a disinterested third party holds all money and documents relating to a transaction until all of the terms and conditions of the escrow instructions have been satisfied.
Escrow
Most buyers condition the sale on one or more _____of the property by one or more experts. So inspections and their results are an important aspect of the closing process.
inspections
Most lenders require the buyers to purchase….
property insurance
Most homeowner’s polices have what’s called a coinsurance clause. This clause requires that the homeowner have insurance that is ,………………… Flood insurance is not included in a basic homeowner’s policy.
equal to 80% of the home’s replacement value
RESPA specifically ….. any payment or receiving of fees or kickbacks when a service has not been rendered.
prohibits
The settlement statement has a list of the _______ for both the buyer and the seller.
debits and credits
Some expenses paid at closing must be …. or divided proportionately between the buyer and the seller.
prorated
Any item that is prorated is shown on the settlement statement as a debit to one party and a credit to the other party for the …………
same amount.
The most important document at closing is the
Deed.
Most lenders require buyers to purchase _______________so that their interest in the property is also protected.
Homeowner’s insurance
What is “chain of title”?
A chronology of successive owners of record of a parcel of real estate.
Taxes on the property Buyer Alan is purchasing are $3,200 due on December 31. If the closing is set for October 15, using the 365-day method, how much of the taxes will be credited to the buyer? (Assume it is not a leap year and the day of closing belongs to the seller.)
The seller’s share of $2,525.76
What action identifies if any liens are on a property?
Title Search
The buyer’s primary function at closing is to
Pay the purchase price for the property.
All real estate sales must be reported to the Internal Revenue Service after closing using
Form 1099.
Which type of inspection covers a home’s major mechanical systems?
Standard Home Inspection
What is the real estate transfer tax based on?
Sale price of the property
Amounts collected by the lender and held in a trust or impound account for future payment are called what?
Reserves
Both the buyer and the
Lender should have title insurance.
Which of the following items does the seller usually pay?
Satisfaction of existing liens
Recording the deed is done through which of these?
Constructive notice
What form notifies the borrower of the total amount of interest and property taxes paid in the previous year?
1098
Who should have title insurance?
The buyer and the lender
